Glossary/National Debt: Difference between revisions
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== 'House' Definition == | == 'House' Definition == | ||
National debt refers to the total amount a | National debt refers to the total amount a government owes, primarily through bonds, which are denominated in its own currency. For governments with a high degree of monetary sovereignty, this debt is not a burden, as they can always create the money needed to meet their obligations. National debt represents the private sector’s net financial assets, meaning money created by the government but not yet taxed back. | ||
== Other Definitions == | == Other Definitions == | ||
In mainstream economics, national debt is the accumulation of government borrowing, primarily through the issuance of bonds | In mainstream economics, national debt is the accumulation of government borrowing, primarily from the private sector and foreign lenders, through the issuance of bonds. High levels of national debt are viewed as problematic, potentially leading to higher interest rates, crowding out private investment, or requiring future tax increases. It is regarded as a burden on future generations, and careful management is considered necessary to avoid fiscal crises. | ||
== Discussion == | == Discussion == | ||
MMT argues that for countries with | MMT argues that for countries with a high degree of monetary sovereignty (e.g., the U.S., UK, Japan), the size of the national debt itself is not inherently problematic. The key issue is whether government spending exceeds the productive capacity of the economy, which could lead to inflation. MMT views national debt as the private sector’s untaxed savings, and insolvency is never a concern for a currency-issuing government. | ||
In contrast, orthodox economists worry that excessive national debt can lead to higher interest rates, inflation, or a loss of confidence in a government's ability to manage its finances. They emphasize the need for balanced budgets and debt reduction to prevent fiscal crises. | In contrast, orthodox economists worry that excessive national debt can lead to higher interest rates, inflation, or a loss of confidence in a government's ability to manage its finances. They emphasize the need for balanced budgets and debt reduction to prevent fiscal crises. | ||
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== Examples == | == Examples == | ||
Historical Debt Outstanding of [https://fiscaldata.treasury.gov/datasets/historical-debt-outstanding/historical-debt-outstanding the United States] | |||
== References == | == References == | ||
Revision as of 07:36, 6 September 2024
Glossary | Concepts | National (Public) Debt
'House' Definition
National debt refers to the total amount a government owes, primarily through bonds, which are denominated in its own currency. For governments with a high degree of monetary sovereignty, this debt is not a burden, as they can always create the money needed to meet their obligations. National debt represents the private sector’s net financial assets, meaning money created by the government but not yet taxed back.
Other Definitions
In mainstream economics, national debt is the accumulation of government borrowing, primarily from the private sector and foreign lenders, through the issuance of bonds. High levels of national debt are viewed as problematic, potentially leading to higher interest rates, crowding out private investment, or requiring future tax increases. It is regarded as a burden on future generations, and careful management is considered necessary to avoid fiscal crises.
Discussion
MMT argues that for countries with a high degree of monetary sovereignty (e.g., the U.S., UK, Japan), the size of the national debt itself is not inherently problematic. The key issue is whether government spending exceeds the productive capacity of the economy, which could lead to inflation. MMT views national debt as the private sector’s untaxed savings, and insolvency is never a concern for a currency-issuing government.
In contrast, orthodox economists worry that excessive national debt can lead to higher interest rates, inflation, or a loss of confidence in a government's ability to manage its finances. They emphasize the need for balanced budgets and debt reduction to prevent fiscal crises.
History
Examples
Historical Debt Outstanding of the United States
References
- Mitchell, W., Wray, L. R., & Watts, M. (2019). Macroeconomics. Red Globe Press.
- Kelton, S. (2020). The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy. PublicAffairs.
- Mosler, W. (2010). Seven Deadly Innocent Frauds of Economic Policy. Valance Co.